Beware of the Defeasance Gray Market
In July 2022, CMBS 2.0+ loans special servicing rate is 4.5%, down from 8% one year ago and 6.3% in January 2022. The defeasance of these newer vintage CMBS loans highlights hidden Borrower risk, in the area of defeasance portfolio structuring and pricing. Borrower exposure to securities portfolio markup grows exponentially with 2.0 loans due to a combination of longer maturities and alternative collateral options. Sloppy structuring and poor pricing equate to higher Borrower costs.
Over the years, we have heard the CRE industry lament that defeasance securities pricing and structure “are what they are,” but this assumption could not be further from the truth. It takes careful planning throughout the entire defeasance process to identify and accumulate the most efficient and highest yielding portfolio for closing. Our competitors lack securities knowledge, systems, and relationships, forcing Borrowers to rely on third party bond salesmen for portfolio structuring and execution without any oversight or scrutiny. Sure, your defeasance may have closed, but you paid too much.
Thirty Capital Financial recognized early on the potential for unsupervised sales traders to structure with little attention to detail and profit off defeasance portfolios at the expense of Borrowers. That is why we invested in education, technology, and relationships with the actual trading desks to protect our clients’ interests; unfortunately for many Borrowers, the gray market still exists. Borrowers that “defease with ease” can rest assured that their portfolio is independently structured and audited from quote stage through closing. As a Borrower advocate, we provide clients with unbiased representation, transparent pricing and the most experienced deal managers in the industry. As an added bonus, our deal volume allows us to demand the best pricing from our securities relationships and enables us to provide clients with a “no hidden markup” guarantee. When you use the best, you pay less.
Highest Volume = Strongest Relationships = Lowest Costs.
